Ch. 4 Detecting Risk Flashcards
Critical success factor
An element, necessary for an org’s success, that is derived from a strategic objective
Risk Tolerance
Amount of uncertainty an org is prepared to accept
KPIs measure activity tied to ___
CSF (critical success factor)
Key performance indicator
Measures progress toward an organizational goal
Risk tolerance measures how much deviation from the ___ an org is willing to accept
KPI
Key Risk Indicators
A tool used by an organization to measure the uncertainty of meeting a strategic business objective
Difference between KPIs and KRIs
KPIs measure progress toward a goal; KRIs measure risk and volatility that affects the achievement of goals
True or false: KRIs are only internal
False; can be external
Organizations should develop____ KRIs
A. Many or B. Limited
Limited - focus on those with the greatest impact to the organization
Economic capital
Amount of capital required by an org to ensure solvency at a given probability level, based on fair value of its assets minus the fair value of its liabilities
Business Process Management (BPM)
System to analyze, model, measure, and optimize business processes
5 BPM steps:
- Design/redesign processes
- Model scenarios
- Execute process changes
- Monitor results
- Optimize processes
3 Goals of BPM:
- Improve __
- Manage ___
- Increase ___
Efficiency; risks; profitability
Trigger levels can indicate when __ __ must be taken
corrective action
What role does ERM play in BPM?
Helping to identify risks to processes before they occur
Which one of the following terms refers to information used as a basis for measuring the significance of a risk?
A. Risk Appetite
B. Risk Threshold
C. Risk Tolerance
D. Risk Criteria
D. Risk Criteria
